Waiting to shine
The major shareholders of Trans Hex Group certainly have a very different opinion of the value of the diamond miner’s shares than the rest of the market. Last week Trans Hex acquired another 27.2% stake in unlisted diamond miner West Coast Resources (an old De Beers operation) from RAC Investment Holdings, which itself is a major shareholder in Trans Hex.
Trans Hex now owns more than
67% of West Coast Resources. The R39.1m deal will be funded by the issue of 9.4m new Trans Hex shares, meaning an effective price of 414c/share. That’s well above the levels seen in Trans Hex over the past month — and the price of 297c at the time of writing.
The deal was struck by two parties with considerable knowledge of the respective assets, which suggests the market might take note of the transaction terms.
The deal infers a value of about R145m for West Coast Resources, or R130m if the Trans Hex market price is used as a value gauge.
The carrying value of Trans Hex’s original 40% stake in West Coast Resources (as at the end of March) was R98.5m, after adjustments relating to a preferential loan and capitalised interest. That inferred a value of about R246m that has been markedly reduced in terms of the latest transaction, which probably reflects the underwhelming performance by West Coast Resources
. . . so far.
In a bid to balance the shareholdings in Trans Hex between RAC and investment entities aligned to retail tycoon Christo Wiese (whose penchant for diamond mining is well known) there will be a specific issue of shares worth R77.6m to the latter, also at 414c/share.
The question is: how long before Trans Hex can dangle a big bunch of carats in front of the market?
It’s worth noting the specific issue of shares “is dependent on a future event or decision, which is outside the control of Trans Hex”.
On the Astral plane
Shares in Astral Foods are soaring again after an updated trading statement showed initial projections of y/y earnings growth of 65% to end-september were too conservative. It now expects headline earnings to rocket 80%-100% to R17.37-r19.30/share — meaning the company might have earned as much as R15/share in resurgent H2 trading.
Officially, Astral put the improvement down to the fact that no further losses were attributable to the outbreak of Avian flu and stronger trading in September. Still, I can’t help wondering whether the decision by RCL Foods to slash individually quick-frozen portion production at Rainbow Chickens put extra wind beneath Astral’s wings.
Finbond’s trump card
The market has good reason to be wary of small-cap counters expanding into new offshore markets. The US, in particular, has been a tough nut to crack. However, financial services counter Finbond seems to be making progress in its goal of growing dollar earnings to 70%-80% of net earnings in three to five years. Finbond holds a sizeable niche in the US unsecured lending market, focusing on short-term small loans offered through 223 branches in more states (16) than you’d hear mentioned on a Bruce Springsteen album.
In the six months to end-august, 55.9% of Finbond’s revenue was earned in dollars. Total segment revenue from its North American short-term lending activities (comprising interest and fees) topped US$46.6M (R652m) compared with $12.8m for the same period in 2016. The overall gross short-term unsecured loan book ended at $54.3m (R707m), with the average North American loan size of $346 (R4,928) at an average tenure of 6.07 months.
Finbond is acquiring more branches in Alabama, Missouri, Florida and Ontario, Canada, and engaging with a number of larger strategic acquisition targets in the US short-term instalment lending and car title lending markets. So far, so good . . .
How long before diamond miner Trans Hex can dangle a big bunch of carats in front of the market?